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Home My WebLink About20240124HHACSpecial- agenda packet Date:Wednesday, January 24, 2024 Time:3:30 p.m. Location:City Hall, Bldg. #A, Executive Conference Room #103 276 Fourth Avenue, Chula Vista Housing and Homelessness Advisory Commission Special Meeting Public Comments: Public comments may be submitted to the Housing and Homelessness Advisory Commission in the following ways: In-Person comments during the meeting. Join us for the Housing and Homelessness Advisory Commission meeting at the time and location specified on this agenda to make your comments. • Submit an eComment. Visit www.chulavistaca.gov/boardmeetings, locate this meeting, and click on the comment bubble icon. Click on the item you wish to comment on, and then click on "Leave Comment." The commenting period will close one hour before the meeting. All comments will be made available to the Commission and the public. • Mail or email comments. Submit comments via email to HHAC@chulavistaca.gov or by mail to Housing and Homelessness Advisory Commission, 276 Fourth Ave, Chula Vista, CA 91910. Please send comments early; written comments received within one hour of the meeting may not be distributed until the following day. • Accessibility: Individuals with disabilities are invited to request modifications or accommodations in order to access and/or participate in a meeting contacting the Housing and Homelessness Advisory Commission office of the City Attorney Department Staff at HHAC@chulavistaca.gov (California Relay Service is available for the hearing impaired by dialing 711) at least forty-eight hours in advance of the meeting. Pages 1.CALL TO ORDER 2.ROLL CALL Commissioners Cabral, Carlseen, Paddock, Montoya-Cesena,Robinson Opeodu, Whitsell, and Chair Merino. 3.PUBLIC COMMENTS Persons may address the Commission on any subject matter within the Commission’s jurisdiction that is not listed as an item on the agenda. State law generally prohibits the Commission from discussing or taking action on any issue not included on the agenda, but, if appropriate, the Commission may schedule the topic for future discussion or refer the matter to staff. If you wish to speak on any item, please fill out a "Request to Speak" form and submit it to the Secretary prior to the meeting or submit an electronic comment per the instructions on page one of this agenda. 4.ACTION ITEMS The Item(s) listed in this section of the agenda will be considered individually by the Commission and are expected to elicit discussion and deliberation. If you wish to speak on any item, please fill out a "Request to Speak" form and submit it to the Secretary prior to the meeting or submit an electronic comment per the instructions on page one of this agenda. 4.1 Proposed Ordinance Update: Consideration of Adoption of Residential For- Sale Affordable Unit Requirements and Marketing, Application, Lottery, and Waitlist Requirements for Affordable Rental Housing Projects 3 Action: Commission discuss the proposed requirements and provide an advisory recommendation to Planning Commission. OTHER BUSINESS 5.STAFF COMMENTS 6.CHAIR'S COMMENTS 7.COMMISSIONERS' COMMENTS 8.ADJOURNMENT to the special meeting of the Housing and Homelessness Advisory Commission on __________. Materials provided to the Housing and Homelessness Advisory Commission related to any open-session item on this agenda are available for public review by contacting the Housing and Homeless Services Department at HHAC@chulavistaca.gov. City of Chula Vista Housing and Homelessness Advisory Commission January 24, 2024 Agenda Page 2 of 12 v . 0 03 P a g e | 1 City of Chula Vista Boards & Commissions Housing & Homeless Advisory Commission January 24, 2024 Item No. 4.1 ITEM TITLE Consideration of Adoption of Residential For-Sale Affordable Unit Requirements and Marketing, Application, Lottery, and Waitlist Requirements for Affordable Rental Housing Projects Location: No specific geographic location Recommended Action: Commission discuss the proposed requirements and provide an advisory recommendation to Planning Commission. SUMMARY The Residential For-Sale Affordable Unit Requirements and Marketing, Application, Lottery, and Waitlist Requirements for Affordable Rental Housing Projects are being proposed as part of a package of ordinances and resolution in order to update and formalize the City’s processes for affordable housing. Two related ordinances, for inclusionary housing and density bonus updates, were considered by the Housing & Homeless Advisory Commission on October 25, 2023. The inclusionary ordinance and density bonus ordinance provide the options of for-sale affordable units and rental affordable units to meet the requirements. ENVIRONMENTAL REVIEW The activity is not a “Project” as defined under Section 15378 of the CEQA State Guidelines; therefore, pursuant to State Guidelines Section 15060(c)(3) no environmental review is required. DISCUSSION Residential For-Sale Affordable Unit Requirements To provide consistency in the implementation of affordable homeownership opportunities, Council Policy No. 453-02 via Council Resolution No. 2003-492 was established and has subsequently been amended, most recently on August 21, 2013, via Council Resolution No. 2013-154, establishing the procedures and guidelines for the development of affordable for sale housing for first-time low- and moderate- income buyers (reference Attachment 1). The Residential For-Sale Affordable Unit Requirements in the form of an ordinance is proposed in order to substantiate the policy. The ordinance will outline the buyer selection criteria and establish the requirement for a Value Recapture Agreement for for-sale affordable units. The ordinance shall apply to any development of for-sale affordable units within the City, unless otherwise regulated by other funding sources. The City’s Page 3 of 12 City of Chula Vista Housing and Homelessness Advisory Commission January 24, 2024 Agenda P a g e | 2 Value Recapture Agreement will ensure that the unit shall remain affordable to the buyer as long as they reside in the unit, while ensuring the public benefit of the affordable program upon resale. Rather than recording resale restrictions against the property, upon resale the City will collect the full amount of the difference between the affordable sale price and the market price at the time of initial sale, as well as a share of any equity growth in the value of the property since the initial sale. In addition to resale, a transfer, cash- out refinance, change in title, or use of the property for rental housing may also trigger value recapture by the City. The proceeds of such value recapture will be recycled into loans to new first-time homebuyers. In this way, the City will invest the recaptured funds to pass on affordable housing opportunities to new homebuyers. In staff’s experience, recycling the funds through a Value Recapture Agreement is a more efficient and effective process than enforcing resale restrictions. More detailed guidance to implement the ordinance will be provided via administrative guidelines, to be published separately on the City’s website. Such guidelines will describe the income verification requirements of homebuyers, the formula for calculating the equity share agreement, and other administrative details consistent with the purpose of the ordinance, much of which is in the current Council Policy. Marketing, Application, Lottery, and Waitlist Requirements For several years the City has overseen the process of initial lease-ups for affordable units when the City is a party to a Regulatory Agreement. The City is bringing forth an ordinance regulating the marketing and leasing of affordable housing in order to promote industry best practices and align City requirements with state and federal laws, such as Title VI of the Civil Rights Act of 1964, the Federal Fair Housing Act, and California’s Fair Employment and Housing Act. While the proposed ordinance will align with past practices, the proposed ordinance will provide greater focus on assisting those already in our community. Narrow or informal marketing efforts such as locally distributed flyers and word-of-mouth advertising may limit the ability of the public to be informed about leasing opportunities. Similarly, tenant selection practices such as first-come, first-served waitlists may unfairly advantage one demographic group or applicants with a personal connection to the Developer or management agent. To mitigate concerns and promote equity in the process, the City has been requiring that affordable housing owners with Regulatory Agreements with the City, carry out robust marketing efforts, with special outreach to groups least likely to apply for such housing, and select tenants via a randomized lottery. Examples of best practices that the proposed ordinance would encourage would include advertising to a diverse range of demographic groups, providing clear information about accommodations for disabilities, and adopting procedures for addressing grievances and complaints by applicants or tenants. Such practices would ensure a smooth, fair, and transparent process for the leasing and management of affordable housing. The proposed ordinance would also put forth a preference system for affordable housing applicants. A similar system has been used by City staff in Regulatory Agreements with developers in the past, with two new added preferences in italics below:  First preference would be given to Chula Vista residents displaced due to government action or individuals referred by the City’s Department of Housing and Homeless Services that are currently receiving services such as Tenant Based Rental Assistance or vetted through the City’s Homeless Outreach Team. Page 4 of 12 City of Chula Vista Housing and Homelessness Advisory Commission January 24, 2024 Agenda P a g e | 3  Second preference would be given to Chula Vista residents subject to a no-fault just cause eviction under Chula Vista Municipal Code Chapter 9.65.  Third preference would be given to Chula Vista residents and workers.  Fourth preference would be given to all other eligible members of the general public. Such a preference system would help prioritize the needs of Chula Vista’s most vulnerable residents and ensure that Chula Vista residents benefit from new production of affordable housing, while still ensuring access for the general public. Conclusion The proposed ordinances would provide clear guidance regarding affordable housing development and operations and ensure that best practices in the sale and rental of affordable housing are followed while providing priority to those that have connections within the Chula Vista community.. DECISION-MAKER CONFLICT Staff has determined that the action contemplated by this item is ministerial, secretarial, manual, or clerical in nature and, as such, does not require the Housing and Homeless Advisory Commission members to make or participate in making a governmental decision, pursuant to California Code of Regulations Title 2, section 18704(d)(1). Consequently, this item does not present a conflict of interest under the Political Reform Act (Cal. Gov't Code § 87100, et seq.). Staff is not independently aware, and has not been informed by any Housing and Homeless Advisory Commission member, of any other fact that may constitute a basis for a decision maker conflict of interest in this matter. Staff Contact: Chris Stanley, Senior Planner Page 5 of 12 City of Chula Vista Housing and Homelessness Advisory Commission January 24, 2024 Agenda COUNCIL POLICY- CITY OF CHULA VISTA SUBJECT: DEVELOPMENT OF AFFORDABLE FOR SALE HOUSING FOR LOW- AND MODERATE- INCOME BUYERS POLICY NUMBER EFFECTIVE DATE PAGE 453-02 12-09-03 1 of 7 ADOPTED BY: Resolution No. 2003-492 DATED: 12-09-03 AMENDED BY: Resolution No. 2005-314, 9-13-05 and 2013-154, 08-06-2013 UPDATED: 08-21-2013 PURPOSE The Housing Element of the City’s General Plan (2013-2020) establishes goals and policies for the City to address a number of important housing related issues. One of the focus areas is to ensure the city supports varied housing opportunities for the diverse needs of residents including the establishment of permanent affordable housing opportunities for low- and moderate- income households. This Policy establishes the procedures and guidelines for the development of affordable for sale housing for first-time low- and moderate- income buyers, defined as households whom have not had ownership interest in any property within three years from the date of application and are earning no more than 80% and 120%, respectively, of the Area Median Income (“AMI”). The AMI, based upon household size, is determined annually by the U.S. Department of Housing and Urban Development. This policy outlines the development guidelines, program requirements including underwriting criteria and the buyer selection criteria that shall pertain to any for-sale development proposed to have affordable units within the City and not otherwise regulated by other funding sources, inclusive of the City’s Balanced Communities (“Inclusionary”) Policy. The Inclusionary Policy requires residential development projects consisting of 50 units or more to restrict a minimum of ten percent (10%) of the units for occupancy by and affordable to low- and moderate- income households, with a minimum of 5% of the units for low-income residents. Any Developer wishing to satisfy their affordable housing obligation through the development of affordable for-sale housing within the City must adhere to the policies contained herein and the Balanced Communities Policy Guidelines. DEVELOPMENT GUIDELINES The purpose of this policy is to provide affordable homeownership opportunities for low- and moderate- income households and to ensure that upon sale of the “affordable” unit the City receives adequate funds to continue to promote affordable homeownership programs throughout the City. To that end, the two primary components of this development process include the establishment of a loan, through a Second Trust Deed, between the Homebuyer and the City and an equity share system based upon the Homebuyer’s length of occupancy. The City and Page 6 of 12 City of Chula Vista Housing and Homelessness Advisory Commission January 24, 2024 Agenda COUNCIL POLICY- CITY OF CHULA VISTA SUBJECT: DEVELOPMENT OF AFFORDABLE FOR SALE HOUSING FOR LOW- AND MODERATE- INCOME BUYERS POLICY NUMBER EFFECTIVE DATE PAGE 453-02 12-09-03 2 of 7 ADOPTED BY: Resolution No. 2003-492 DATED: 12-09-03 AMENDED BY: Resolution No. 2005-314, 9-13-05 and 2013-154, 08-06-2013 UPDATED: 08-21-2013 Developer shall implement the development mechanisms as outlined below. The City’s Second Loan will ensure that the unit shall be affordable to the buyer while maintaining the market value of the property. The Silent Second Loan shall be defined as a loan that does not require any payments until sale, transfer, refinance, rental or change in title of the property. City Loan Calculation The calculation of the City’s second loan amount shall be based upon the establishment of the “Affordable Sales Price” (ASP) and “Market Rate Price” (MRP) of each type of unit, based upon number of bedrooms per unit. The City’s Second Loan amount is calculated based upon the difference between the MRP and the ASP. Silent Second Loan Amount=MRP-ASP The ASP shall be calculated based on established benchmarks defined in California Health and Safety Code §50052.5. Key assumptions for calculating the ASP are based upon a number of factors, including but not limited to: assignment of family size (number of persons) vs. unit size (number of bedrooms) based on the number of persons exceeding the number of bedrooms by one (1 person per bedroom+1 person), any homeowner’s association dues, utility allowance, property tax, Mello Roos (CFDs) and any other additional costs of construction that are passed on to the buyer. This calculation is then incorporated into the formula that determines what the City’s second loan amount will be. Assumptions utilized to calculate the ASP will be subject to the normal costs and fees as associated with the purchase of the particular property based upon the real estate market and negotiations between the City and Developer at the time of the development proposal. The criteria included that will remain constant are the percentage of downpayment required, term of the loan and the maximum housing to income ratios. Other factors may be applied, and are subject to change, based upon the individual development costs. The MRP will be determined and mutually agreed upon by the City and Developer based upon current real estate comparables and market analysis at the time of the development proposal. The MRP may be subject to change upon the approval of the City during the development/construction period. Page 7 of 12 City of Chula Vista Housing and Homelessness Advisory Commission January 24, 2024 Agenda COUNCIL POLICY- CITY OF CHULA VISTA SUBJECT: DEVELOPMENT OF AFFORDABLE FOR SALE HOUSING FOR LOW- AND MODERATE- INCOME BUYERS POLICY NUMBER EFFECTIVE DATE PAGE 453-02 12-09-03 3 of 7 ADOPTED BY: Resolution No. 2003-492 DATED: 12-09-03 AMENDED BY: Resolution No. 2005-314, 9-13-05 and 2013-154, 08-06-2013 UPDATED: 08-21-2013 Equity Share Table 1 illustrates the equity share percentages between the City and Homeowner based upon the length of time that the Homeowner has occupied the property. The applicable equity share, if any, plus principal shall be due upon sale, transfer, refinance, rental or change of title on the property. Should a Homeowner sell, transfer, rent or reconvey the property before one year has passed from the date of the close of escrow, the City shall retain 100% of the equity in the property, minus approved Homebuyer expenditures, including amount of initial downpayment and approved costs of sale. Table 1 For-Sale Low- and Moderate- Income Homebuyer Equity Share Occupancy Period (months) City Share Homeowner Share 0-12 100% 0% 13-24 95% 5% 25-36 90% 10% 37-48 85% 15% 49-60 80% 20% 61-72 50% 50% 73-84 45% 55% 85-96 40% 60% 97-108 35% 65% 109-120 30% 70% 121-132 25% 75% 133-144 20% 80% 145-156 15% 85% 157-168 10% 90% 169-180 5% 95% Thereafter 0% 100% Page 8 of 12 City of Chula Vista Housing and Homelessness Advisory Commission January 24, 2024 Agenda COUNCIL POLICY- CITY OF CHULA VISTA SUBJECT: DEVELOPMENT OF AFFORDABLE FOR SALE HOUSING FOR LOW- AND MODERATE- INCOME BUYERS POLICY NUMBER EFFECTIVE DATE PAGE 453-02 12-09-03 4 of 7 ADOPTED BY: Resolution No. 2003-492 DATED: 12-09-03 AMENDED BY: Resolution No. 2005-314, 9-13-05 and 2013-154, 08-06-2013 UPDATED: 08-21-2013 Repayment Requirements and Conditions Sale, transfer, refinance with cash-out or for purposes of debt consolidation or renting of the property requires both repayment of the Silent Second Loan PLUS repayment of a portion of the equity based upon the length of occupancy at the time of such action. Should the Homeowner wish to add an individual to the Title of the property or include the property in a Trust they must obtain City approval prior to such action. Either action may result in the loan and/or equity share becoming due and payable within 90 days of the action and shall be at the discretion of the City. Subordination The City will subordinate its second loan if the Homeowner wishes to obtain a straight rate and term refinance (no cash out or debt consolidation). Neither the City’s second loan or the equity share will be due. The City will evaluate the Homeowner’s Ratios to determine if the borrower can repay a portion of the silent second or if the new loan remains affordable for borrowers who refinance into a less loan term. Short Sale and Hardship Upon loan repayment request, if the combined first and second mortgages are below current market value of a unit, the City will require homeowners to seek homeownership counseling prior to the approval of a short sale of the property. In addition, these requests will be reviewed on a case by case basis. City Silent Second Loan Restructuring The Director of Development Services, or his or her designee, may authorize a reduction in the City’s Silent Second Loan Amount principal (after sale) for buyers whom are in good standing (for a minimum of 6 months and are current on their mortgage payments, property taxes, HOA fees, and City of Chula Vista Deed of Trust and Promissory Note), eligible for a refinance and where initial MRP has declined by more than 40% to current value, using current underwriting and industry standards to restructure said loan. Page 9 of 12 City of Chula Vista Housing and Homelessness Advisory Commission January 24, 2024 Agenda COUNCIL POLICY- CITY OF CHULA VISTA SUBJECT: DEVELOPMENT OF AFFORDABLE FOR SALE HOUSING FOR LOW- AND MODERATE- INCOME BUYERS POLICY NUMBER EFFECTIVE DATE PAGE 453-02 12-09-03 5 of 7 ADOPTED BY: Resolution No. 2003-492 DATED: 12-09-03 AMENDED BY: Resolution No. 2005-314, 9-13-05 and 2013-154, 08-06-2013 UPDATED: 08-21-2013 PROGRAM REQUIREMENTS The City and the Developer will ensure the development meets all of the following requirements: 1. Should subsidized financing, offsets, or incentives be proposed and obtained, the development requirements of that program or granting Agency must also be met. 2. All “affordable” units will be sold to buyers meeting both the income-based and cost- based measures of affordability. The income-based measure is the annual income at 80% and 120% of AMI based upon household size using 24 CFR Part 5 to calculate household income. The cost-based measure may not exceed 40% of 80% and 120% of AMI for all loans except FHA which has a cap of 36%. 3. The units will be priced as affordable to buyers at the 70% and 110% of AMI level, but the maximum income level for qualifying households will still be at 80% of AMI for low- income and 120% for moderate- income. Pricing will be set using a front end ratio of 30% for low income buyers and 36% for moderate income buyers. 4. Prospective homebuyers must be pre-qualified by the designated Lender, as determined by the City/Developer, in order to purchase an affordable unit, although the homebuyer may obtain his/her permanent financing from any licensed mortgage broker or lender of their choosing. Homebuyers shall notify City staff in writing of intent to use “outside” lender at least 30 days before expected escrow closing, as determined by the developer. 5. Homeowner is required to attend a qualified “Homebuyer Education Program” and provide evidence to the City of their attendance before the close of escrow. 6. The Borrower must sign a release authorizing the City to receive a copy of the buyer’s 1003 (Mortgage Loan Application), Good Faith Estimate and Underwriting Transmittal Summary (1008) or similar form from Lender, which shall be forwarded to City as part of the application review process. Page 10 of 12 City of Chula Vista Housing and Homelessness Advisory Commission January 24, 2024 Agenda COUNCIL POLICY- CITY OF CHULA VISTA SUBJECT: DEVELOPMENT OF AFFORDABLE FOR SALE HOUSING FOR LOW- AND MODERATE- INCOME BUYERS POLICY NUMBER EFFECTIVE DATE PAGE 453-02 12-09-03 6 of 7 ADOPTED BY: Resolution No. 2003-492 DATED: 12-09-03 AMENDED BY: Resolution No. 2005-314, 9-13-05 and 2013-154, 08-06-2013 UPDATED: 08-21-2013 Underwriting Requirements The City shall require that each homebuyer meet the following underwriting standards in order to be eligible for purchase of an Affordable Unit, regardless of Lender’s standard or available underwriting criteria: 1. Minimum contribution by buyer of three percent (3%) of the Purchase Price; 2. Maximum liquid assets after downpayment and closing cost contribution not to exceed $25,000 (not including retirement accounts i.e. IRA’s, 401(k), etc); 3. Non-occupant co-borrowers are not allowed; 4. Maximum total housing ratio of 36% for FHA loans and 40% for all other loans; 5. Maximum debt-to-income ratios of 41% for FHA loans and 45% for all other loans; 6. Minimum front-end ratio of 30% for income qualification purposes; 7. No refinancing for the purposes of cash-out or debt consolidation shall be allowed; and 8. Gift funds shall not exceed 10% of the ASP. Lender Requirements The Developer is responsible for providing an informational packet to the Homebuyer detailing the responsibilities of all of the involved parties, including the Lender, City, Developer and Homebuyer. The Lender is required to adhere to the criteria in determining the Homebuyer’s eligibility for an affordable for-sale unit. Appropriate documentation must be forwarded to the City by the Lender. After review and verification that the Homebuyer is qualified, the City will send an Approval Letter to the Lender confirming the Homebuyer’s eligibility. Page 11 of 12 City of Chula Vista Housing and Homelessness Advisory Commission January 24, 2024 Agenda COUNCIL POLICY- CITY OF CHULA VISTA SUBJECT: DEVELOPMENT OF AFFORDABLE FOR SALE HOUSING FOR LOW- AND MODERATE- INCOME BUYERS POLICY NUMBER EFFECTIVE DATE PAGE 453-02 12-09-03 7 of 7 ADOPTED BY: Resolution No. 2003-492 DATED: 12-09-03 AMENDED BY: Resolution No. 2005-314, 9-13-05 and 2013-154, 08-06-2013 UPDATED: 08-21-2013 BUYER SELECTION CRITERIA The Developer shall use the following criteria in order to determine priority for purchase of an affordable for-sale housing unit. Marketing of units shall be in compliance with federal and state fair housing law. A point system has been established so that applicants with a higher number of points will receive preference for units. 5 points Households which are displaced from their primary residence as a result of any of the following: (i) expiration of affordable housing covenants applicable to such residence; (ii) an action of City; (iii) closure of a mobilehome or trailer park community in which the household’s residence was located; or (iv) a condominium conversion involving the household’s residence. One member in the household must have resided in such housing as the primary place of residence for at least one year prior to such action or event. 3 points Households with at least one member who is working within the City of Chula Vista, as that person’s principal place of full-time employment, at the time of application. 3 points Households currently residing within the boundaries of the City of Chula Vista, at the time of application. 2 points Households with at least one member who is a Public Safety employee (fireman/woman and policeman/woman) or Credentialed Teacher. The individual must be working in such position as his/her full-time profession at the time of application. 1 point All other applicants who do not meet any of the above criteria. In the situation where there are applicants with an equal number of points but not enough units available, secondary determining factors may be considered, including number of verifiable household members or individuals with special needs or disabilities. Page 12 of 12 City of Chula Vista Housing and Homelessness Advisory Commission January 24, 2024 Agenda